Our Guide to Contractual Tenancy

Understanding tenancy types is essential for any landlord or property manager. One such agreement, the contractual tenancy, plays a crucial role in specific letting scenarios, especially when the terms fall outside the usual Housing Act 1988 framework. In this guide, we break down everything you need to know—from legal distinctions and compliance implications to real-life landlord situations.

These problems don’t just create frustration; they also eat into your time, your income, and your peace of mind.

Quick Overview

• This type of agreement applies in certain non-standard letting situations.
• It’s typically used when specific Housing Act 1988 conditions aren’t met.
• These agreements allow greater flexibility, but they also come with unique legal considerations.
• Rolling or periodic terms can be written into the original contract.
• Landlords are advised to follow standard best practises to protect their position, even when not legally required.

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What is a Contractual Tenancy?

A contractual tenancy—sometimes referred to as a common law tenancy or non-Housing Act tenancy—is a rental agreement governed by common law rather than statute. Unlike the more familiar Assured Shorthold Tenancy (AST), which has been the default for most residential lets, contractual tenancies apply in cases where one or more of the key qualifying conditions for an AST are not met.

It’s worth noting that ASTs are being phased out under the upcoming Renters’ Rights Bill, meaning that all new tenancies in England will soon become periodic by default. While this change won’t directly alter how contractual tenancies function, it’s important to understand how tenancy frameworks are shifting across the board.

Most commonly, a contractual tenancy arises when:

• The tenant is not an individual (e.g., a company or local authority).
• The property is not the tenant’s only or principal home.
• The rent is either very high (above £100,000 per annum) or very low (below £250 per annum).
• The property is a holiday let or involves a resident landlord.

Because it’s outside the scope of the Housing Act, this form of tenancy allows more flexibility—but also requires more vigilance.

When Do You Need One?

Let’s explore real-world examples where a contractual tenancy would apply:

• Company lets: A business rents a flat for travelling staff.
• Secondary residences: An individual rents a “pad in town” while keeping a main home elsewhere.
• Luxury properties: The annual rent exceeds £100,000.
• Resident landlord: The owner lives in the same building.
• Holiday homes: Lettings for leisure, not long-term residence.

In these cases, using a standard AST would be incorrect—and potentially non-compliant. A tailored contractual tenancy ensures legal clarity from the outset.

Contractual Tenancy vs AST: What’s the Difference?

The fundamental difference lies in legal protection and scope. ASTs are defined by the Housing Act 1988 and provide specific rights and responsibilities for both parties. In contrast, a contractual tenancy operates under common law principles.

It’s also important to highlight that ASTs will soon be replaced entirely by rolling periodic tenancies under the new Renters’ Rights Bill. This does not impact contractual tenancies directly, but reinforces the value of clear, customised agreements when Housing Act rules don’t apply.

Key distinctions include:

• Legal foundation: AST = statutory; Contractual = common law.
• Deposit rules: ASTs require government scheme protection. Contractual tenancies do not—though it’s still wise to register them.
• Documents: ASTs require the How to Rent guide and prescribed information. Contractual tenancies do not.
• Fees & deposits: ASTs are subject to the Tenant Fees Act 2019; contractual agreements can exceed these limits.

If you’re wondering what a contractual periodic tenancy is, it refers to a tenancy agreement that is both contractual in nature and continues periodically (e.g., monthly) under agreed terms.

Legal Responsibilities and Compliance

Even though contractual tenancies fall outside statutory frameworks, compliance still matters. Some legal obligations remain the same:

• Gas Safety Checks and EPCs are still required.
• Section 21 notices must follow different timelines depending on whether the tenancy is contractual or statutory.
• Rent increases can be agreed in the tenancy contract—unlike with ASTs where Section 13 must be used.

Many landlords choose to voluntarily comply with Housing Act standards to reduce risks—such as registering deposits and issuing the How to Rent guide regardless.

Contractual Periodic Tenancy Explained

A contractual periodic tenancy is a tenancy that continues beyond the fixed term on a rolling basis—usually month-to-month—but as part of the original agreement.

This differs from a statutory periodic tenancy, which arises automatically if no new contract is agreed at the end of a fixed term. In a contractual periodic tenancy, the continuation is explicitly stated in writing.

This structure will become increasingly relevant as fixed-term ASTs are eliminated. New periodic agreements—whether statutory or contractual—will be the new normal under the Renters’ Rights Bill.

Why is this important?

• It impacts how rent can be increased.
• It determines how Section 21 notices must be served.
• It clarifies who’s liable for council tax if the tenant vacates.

Understanding what is a contractual periodic tenancy ensures landlords retain control and avoid unintended statutory obligations.

Practical Risks: When a Contractual Tenancy Becomes an AST

Let’s say you rent a city flat to an individual who says it won’t be their main home. You agree on a contractual tenancy, with a deposit over the five-week cap and no prescribed documents.

A few months in, they separate from their partner and begin living in the flat full-time. Legally, this could now be considered their only or principal home, triggering AST classification.

While this scenario is becoming less likely with ASTs being phased out, existing agreements may still fall into this trap.

Implications:

• The deposit should have been protected.
• Prescribed documents (e.g., How to Rent guide) become mandatory.
• You may face penalties if you now try to issue a Section 21 notice without meeting AST requirements.

This highlights why it’s crucial to regularly check your tenant’s status and update the documentation if circumstances change.

Best Practises for Landlords

Whether your tenancy is contractual or statutory, some best practises apply:

1. Verify tenant status – Are they an individual or company?
2. Ask about residency – Will this be their only home?
3. Use detailed tenancy agreements – Be clear on periodic terms and rent review clauses.
4. Register the deposit anyway – It reduces risk.
5. Issue key documents – Even if not required.

By applying these tips, you stay protected—even if the tenancy changes later.

FAQs About Contractual Tenancy 

What is a contractual tenancy in the UK? 

A contractual tenancy is a private rental agreement between a landlord and a tenant that is not regulated by the Housing Act 1988. It usually applies where the tenant is not an individual, the rent is exceptionally high or low, or the property is not their main residence. These tenancies are governed by common law, offering flexibility but requiring careful documentation.

What is a contractual tenancy example? 

A typical example of a contractual tenancy is when a company rents a flat for a travelling employee, and the property is not used as anyone’s main home. Another instance might involve a high-end holiday home let on a short-term basis. These types of tenancies fall outside of the Housing Act and are governed by common law.

Do I need to protect a deposit under a contractual tenancy? 

You are not legally required to protect a deposit under a contractual tenancy as it falls outside the statutory deposit protection rules. However, doing so is considered best practise and helps protect landlords in case the tenancy later qualifies as an AST. Voluntary compliance with deposit schemes can safeguard against future disputes and potential penalties.

What is a contractual periodic tenancy? 

A contractual periodic tenancy is a tenancy that rolls on (e.g. monthly) based on terms set in the original agreement, without forming a new tenancy at the end of the fixed term. It is different from a statutory periodic tenancy, which arises automatically under law when no new agreement is signed. This type of tenancy gives landlords more control over terms like rent increases and notice periods, and will become more relevant as fixed terms are phased out.

Can a contractual tenancy become an AST? 

Yes, a contractual tenancy can become an AST if the tenant’s circumstances change—for example, if the property becomes their only or principal home. This change triggers the conditions set out in the Housing Act 1988, making the tenancy subject to AST rules. Landlords may then need to comply with deposit protection, documentation, and notice period regulations—although such scenarios will become less common under the Renters’ Rights Bill.

Can I break a tenancy contract? 

Yes, you can end a tenancy early, but only if the contract allows for a break clause or by mutual agreement between the landlord and tenant. Without a break clause, ending the contract prematurely could lead to legal and financial consequences. Always check the terms of the tenancy agreement before taking action.

Do I need to serve a How to Rent guide? 

For a contractual tenancy, serving the How to Rent guide is not a legal requirement. However, it’s highly recommended to provide it anyway to avoid compliance issues if the tenancy later becomes an AST. Doing so demonstrates good practise and adds a layer of legal protection for landlords

How SevenLiving Can Help

At SevenLiving, we specialise in creating tailored tenancy agreements that suit your property, your tenant, and your long-term goals. From verifying tenant status to keeping you compliant with changing laws, we manage the process with professionalism and care.

Letting a property doesn’t have to be complicated. With our team behind you, you’ll have peace of mind that every detail—no matter how technical—is handled correctly.Contact our lettings experts today to discuss your rental situation and ensure you’re covered.